The televised revolution: how the TV set watches you

In the west London offices of NDS, the firm behind Sky's set-top
boxes, 24 is playing in tandem on two screens. "You're going to be
underwhelmed," says Nick Thexton, senior vice president of new
initiatives, with a smile. But that's the point: this experience
should be wholly undetectable to the viewer.

As the on-screen digital clock counts the seconds to the
commercial break, the two TVs, previously humming together, snap
apart. One serves an ad for Gillette, the other a Seat commercial,
each discretely inserted by the respective set-top box's hard
drive. "This is the presentation that Rupert Murdoch saw four weeks
ago," Thexton says. It is also the future of television
advertising.

By 2011, Sky says it will be able to deliver directed advertising
("Smart TV") by using viewers' set-top boxes to insert commercials
targeted to them individually. "All the boxes with a particular
profile will take a decision and play a particular advert," Thexton
says. "It could be regional, it may link to demographics and age
range. The viewer isn't aware of being targeted."

The next step is for the software to select viewers even more
precisely using assumptions from viewing behaviour. "When we watch
television, we supply information about our dreams and desires,"
says Thexton. "You might discover that someone is interested in
cars and that they're more susceptible to your message now than
three months ago."

One possibilty for Sky is to go beyond oblique correlation:
subtle ways of interpreting data will allow more acute
observations. "You can account for someone falling asleep from past
channel-changing patterns," Thexton adds. "And you can use the way
people navigate around the guide with the remote to detect
the signature of individuals in a household."

Sky already knows a great deal about its customers from their
sign-up information. Stephen Nuttall, director of Sky's commercial
group, sees the possibility of building in "other data sources
anonymously". This could come from financial-data company Experian,
or loyalty-card schemes. But Sky says it's too early to comment on
whether receiving targeted ads will be a condition of signing up
with the provider.

To a loyalty-card data processor such as Dunnhumby (the force
behind Tesco's Clubcard), it makes complete sense to use
set-top-box data if available. It analyses 40 million
shopping baskets for Tesco a week. "We give every product a DNA -
the reasons people buy it," says chairman Clive Humby. "And then by
accumulating that data we can start to understand buying
motivations: you're looking to save the planet, you're trying to
stand out from the crowd..."

Smart TV adds a whole other dimension. "What we'd really like to do
is match your digital media consumption - the websites you visit,
the TV programmes you watch, the radio stations you listen to - to
your shopping behaviour," Humby says.

Linked-in media data is the dream. "If I knew your whole
transaction profile - restaurants, travel, fashion - that could be
immensely powerful," adds Humby. "You'd need a consent-based model,
but you'd understand every aspect of a person's life. The
credit-card data tells you how they live generally, the supermarket
data tells you their motivations, the media data tells you how to
talk to them. If you have those three things, you're in marketing
nirvana."

So is Dunnhumby already talking to Sky or NDS? Martin Hayward, its
director of strategy and futures, is guarded: "We've got various
conversations going on." But he will confirm that the firm hopes to
link with viewing data "within the next 12 months".